Post on 18-Jan-2016
Take It With a Grain of Salt:What You Need to Know About SWRO and Costs
A Presentation By:
Brent AlspachMalcolm Pirnie
The Water Division of ARCADIS
AWWA Membrane Technology ConferenceLong Beach, CAMarch 30, 2011
Co-Authors
Brent AlspachSenior Environmental EngineerMalcolm Pirnie / ARCADISbrent.alspach@arcadis-us.com
Ian WatsonExecutive Director, AMTAPresident, RosTek Associateswaterpro@msn.com
The Peril of SWRO Cost Figures
Plant #1: The cost of this SWRO project is $1.30 / kgal.
Consider two seawater desalination projects:
Reverse osmosis technology~100 mgd capacity
Located in the Southern Hemisphere (Not in the Middle East)
Plant #2: The cost of this SWRO project is $20 / kgal.
Purpose
• Highlight cost citation issues
• Create discriminating readers
• Promote informed discussion
• Provide an industry resource
Reference the paper in the MTC conference proceedings
or in the IDA Journal
Overview
• Background on SWRO Cost
• The Context of Cost
• Cost Citation Issues— Omitted Cost Components— Insufficient Cost Components— Fluctuating Cost Components
• Summary
You can’t believe everything you read.
Background
Background on SWRO Cost
Cost Type ExpressionExamples
(US)
Capital Cost ($) per unit of installed capacity $/gpd
Operating Cost ($) per unit volume of water produced$/kgal
$/AF
Life Cycle Cost ($) per unit volume of water produced$/kgal
$/AF
Summary of SWRO Cost Types
• Units of operating and life cycle costs are the same
• Multiple units for operating and life cycle costs
Background on SWRO Cost
Cost Type ExpressionExamples
(US)
Capital Cost ($) per unit of installed capacity $/gpd
Operating Cost ($) per unit volume of water produced$/kgal
$/AF
Life Cycle Cost ($) per unit volume of water produced$/kgal
$/AF
Summary of SWRO Cost Types
• Units of operating and life cycle costs are the same
• Multiple units for operating and life cycle costs
Eastern US / General
Background on SWRO Cost
Cost Type ExpressionExamples
(US)
Capital Cost ($) per unit of installed capacity $/gpd
Operating Cost ($) per unit volume of water produced$/kgal
$/AF
Life Cycle Cost ($) per unit volume of water produced$/kgal
$/AF
Summary of SWRO Cost Types
• Units of operating and life cycle costs are the same
• Multiple units for operating and life cycle costs
Western US
Background on SWRO Cost
Unit Category ExpressionExamples
(US)
Flow / Capacity
1 mgd 1,120 AFY
1 ML/day 1,000 m3/day
1,000 m3/day 0.264 mgd
1 mgd imperial (MIGD) 1.2 mgd
Volume 1 AF 326,000 gallons
Useful SWRO Unit Conversion Factors
• English or metric units may be used
• Use of different metric units varies by country / world region
Background on SWRO Cost
Total Water Cost:
Properly expressed, all-inclusive cost
of a developing a water resource
($/kgal or $/AF)
Background on SWRO Cost
Total Water Cost:
Properly expressed, all-inclusive cost
of a developing a water resource
($/kgal or $/AF)
Total Water Cost
Life Cycle Cost
Total Water Cost
Life Cycle Cost
Background on SWRO Cost
Total Water Cost:
Properly expressed, all-inclusive cost
of a developing a water resource
($/kgal or $/AF)
Background on SWRO Cost
Total Water Cost:
Properly expressed, all-inclusive cost
of a developing a water resource
($/kgal or $/AF)
SWRO Plant
Important Points
SWRO Project
vs.
TWC is inherently an estimate.
Context
The Context of Cost
1. Consider the author
Author Example
MainstreamJournalist
The desalination plant will cost $500 million.
Water Treatment Professional
The desalination plant will cost $500M to build and $25M per year to operate.
SWRO Expert Seawater desalination will cost $4.50 per kgal.
The Context of Cost
1. Consider the author– Mainstream journalist
– Water treatment professional
– SWRO expert
2. Consider the perspective— Pro-desalination generous assumptions— Anti-desalination conservative assumptions
3. Consider the target audience— General public— Water treatment professionals— Decision makers— SWRO experts
Key Point
Maintain objective, questioning mentality
Cost Citation Issues
Omitted Cost Components
Insufficient Cost Components
Fluctuating Cost Components
Omitted Cost Components
Omitted Cost Components: Overview
Questions:1. Are all of the appropriate components included?
2. Are the included components disclosed?
Problems:— Most literature is vague about what a cost includes— Article length / space is limited— Author(s) may be unaware of important qualifiers
— Omissions may be intentional (i.e., make SWRO look better / worse)
Key Point
TWC should include ALL applicable components and ONLY the applicable components
Omitted Cost Components: Water Storage & Conveyance
• SWRO plants are located close to the coast— Convenience— Minimize intake and concentrate piping & appurtenances
• Coastal location issues:— End of the distribution system (typical)— Smallest distribution system infrastructure— Lowest elevation
• Implications— Pipe permeate inland to optimum tie-in point— Conveyance pipe alignment likely through developed areas— Possible storage for blending and/or equalization
Why is this important to include?
Omitted Cost Components: Water Storage & Conveyance
• SWRO plants are located close to the coast— Convenience— Minimize intake and concentrate piping & appurtenances
• Coastal location issues:— End of the distribution system (typical)— Smallest distribution system infrastructure— Lowest elevation
• Implications— Pipe permeate inland to optimum tie-in point— Conveyance pipe alignment likely through developed areas— Possible storage for blending and/or equalization
Why is this important to include?
Key Point
Significant capital and O&M costs(Potential)
Omitted Cost Components: Professional Services
Why is this important to include?
Omitted Cost Components: Professional Services
What is important to include?
Engineering
Design
Feasibility studies
Intake & outfall evaluation
Pipeline alignment studies
Site selection
Geotechnical studies
Piloting
Demonstration testing
Rule of Thumb:
5-10% of Construction Cost
Omitted Cost Components: Professional Services
What is important to include?
Permitting
Applications
Reports
Baseline data collection
Environmental impact studies
Ongoing monitoring
Includes:
Field workSampling
DemonstrationTerrestrial & marine work
Omitted Cost Components: Professional Services
What is important to include?
Public Outreach
Literature development
Informational materials
Surveys
Community forums
Legal
‘Nuff said.
Omitted Cost Components: Professional Services
Why is this important to include?
Key Point
Significant capital and O&M costs
Omitted Cost Components: Professional Services
Does capacity matter?
ServiceSignificant
Economies of Scale…?
Engineering design Yes
Other engineering No
Permitting No
Outreach No
Legal No
Omitted Cost Components: Environmental Protection
Mitigation
Land acquisition
Design
Construction
Maintenance
Monitoring
What is important to include?
Renewable Energy Facilities
Land acquisition
Design
Construction
Maintenance
Monitoring
Energy savings (if any) should be deducted from the TWC
Omitted Cost Components: Environmental Protection
Why is this important to include?
Key Point
Significant capital and O&M costs(Potential)
Omitted Cost Components: Subsidies
Why is this important (or not) to include?
Omitted Cost Components: Subsidies
Background: The “Last Straw”
SWRO Project Proponent
Subsidizing Agency
Subsidy Amount
SubsidyType
West BasinMunicipal Water District
Metropolitan Water District of Southern
CA$250/AF Operating
Long Beach Water Department
Municipal Water Districtof Orange County
Tampa Bay WaterSouthwest Florida
Water Management District
$85 million Capital
Omitted Cost Components: Subsidies
Background: The “Last Straw”
SWRO Project Proponent
Subsidizing Agency
Subsidy Amount
SubsidyType
West BasinMunicipal Water District
Metropolitan Water District of Southern
CA$250/AF Operating
Long Beach Water Department
Municipal Water Districtof Orange County
Tampa Bay WaterSouthwest Florida
Water Management District
$85 million Capital
Should subsidies be included in the TWC?
Omitted Cost Components: Subsidies
Background: The “Last Straw”
SWRO Project Proponent
Subsidizing Agency
Subsidy Amount
SubsidyType
West BasinMunicipal Water District
Metropolitan Water District of Southern
CA$250/AF Operating
Long Beach Water Department
Municipal Water Districtof Orange County
Tampa Bay WaterSouthwest Florida
Water Management District
$85 million Capital
It depends.
Omitted Cost Components: Subsidies
Subsidy Problems
• Citation of SWRO costs in the literature often does not indicate whether subsidies are included
• Subsidized SWRO projects have two important costs:1. Cost to rate payers
2. Cost of resource development (i.e., TWC of seawater desalination)
Omitted Cost Components: Subsidies
Subsidy Problems
• Citation of SWRO costs in the literature often does not indicate whether subsidies are included
• Subsidized SWRO projects have two important costs:1. Cost to rate payers
2. Cost of resource development (i.e., TWC of seawater desalination)
Include subsidies
Omitted Cost Components: Subsidies
Subsidy Problems
• Citation of SWRO costs in the literature often does not indicate whether subsidies are included
• Subsidized SWRO projects have two important costs:1. Cost to rate payers
2. Cost of resource development (i.e., TWC of seawater desalination)
Include subsidies
Do NOT include
subsidies
Omitted Cost Components: Subsidies
Subsidy Problems
• Citation of SWRO costs in the literature often does not indicate whether subsidies are included
• Subsidized SWRO projects have two important costs:1. Cost to rate payers
2. Cost of resource development (i.e., TWC of seawater desalination)
Omitted Cost Components: Subsidies
Subsidy Problems
• Citation of SWRO costs in the literature often does not indicate whether subsidies are included
• Subsidized SWRO projects have two important costs:1. Cost to rate payers
2. Cost of resource development (i.e., TWC of seawater desalination)
• Complicates comparison to other water resources projects— SWRO— Conservation / loss prevention— Reuse
Omitted Cost Components: Subsidies
Subsidy Problems
• Citation of SWRO costs in the literature often does not indicate whether subsidies are included
• Subsidized SWRO projects have two important costs:1. Cost to rate payers
2. Cost of resource development (i.e., TWC of seawater desalination)
• Complicates comparison to other water resources projects— SWRO— Conservation / loss prevention— Reuse
Key Point
Compare apples to apples!
InsufficientCost Components
Insufficient Cost Components: Overview
Examples:— Water quality— Plant capacity— Financing— Project delivery method— Siting issues— RO system recovery— Others…
“Insufficient” Cost ComponentsProject characteristics that are inherently included in TWC
estimates, but about which insufficient qualifying information is provided to enable an equitable comparison
between different SWRO projects
Key PointComparing apples to apples
can be difficult!
Insufficient Cost Components: Overview
Examples:— Water quality— Plant capacity— Financing— Project delivery method— Siting issues— RO system recovery— Others…
“Insufficient” Cost ComponentsProject characteristics that are inherently included in TWC
estimates, but about which insufficient qualifying information is provided to enable an equitable comparison
between different SWRO projects
Insufficient Cost Components: Overview
“Insufficient” Cost ComponentsProject characteristics that are inherently included in TWC
estimates, but about which insufficient qualifying information is provided to enable an equitable comparison
between different SWRO projects
Key PointComparing apples to apples
can be difficult!
?
Examples:— Water quality— Plant capacity— Financing— Project delivery method— Siting issues— RO system recovery— Others…
Key PointComparing apples to apples
can be difficult!
Insufficient Cost Components: Overview
“Insufficient” Cost ComponentsProject characteristics that are inherently included in TWC
estimates, but about which insufficient qualifying information is provided to enable an equitable comparison
between different SWRO projects
?
Examples:— Water quality— Plant capacity— Financing— Project delivery method— Siting issues— RO system recovery— Others…
Insufficient Cost Components: Water Quality
Santa Cruz, CA2.5 mgd SWRO
Tampa, FL25 mgd SWRO
Operating Costs
Seawater Quality35,000 mg/L
68 oF (summer)
Seawater Quality28,000 mg/L
85 oF (summer)
SWRO Pressure = f(Salinity, Temp.)
Operating Cost = f(SWRO Pressure)
Higher Salinity, Lower Temps. Higher Pressure Requirements
Higher Pressure Higher Cost
Insufficient Cost Components: Water Quality
Operating Costs
Source: AWWA Manual of Practice M46: Reverse Osmosis and Nanofiltration
Power ⅓ to ½ of the TWC of a SWRO Project
Insufficient Cost Components: Water Quality
Key Point
Be aware of water quality differences before comparing SWRO project costs.
Insufficient Cost Components: Plant Capacity
Capital Cost
Cost Type ExpressionExamples
(US)
Capital Cost ($) per unit of installed capacity $/gpd
Insufficient Cost Components: Plant Capacity
Capital Cost
Cost Type ExpressionExamples
(US)
Capital Cost ($) per unit of installed capacity $/gpd
Insufficient Cost Components: Plant Capacity
Capital Cost
Cost Type ExpressionExamples
(US)
Capital Cost ($) per unit of installed capacity $/gpd
What capacity?— Maximum output?— Average output?— Peak day?— Peak hour?
There is no international standard for the expression of water treatment
plant capacity.
Insufficient Cost Components: Plant Capacity
Capital Cost
Cost Type ExpressionExamples
(US)
Capital Cost ($) per unit of installed capacity $/gpd
Gallons or Imperial Gallons?
Difference of 20%.
Insufficient Cost Components: Plant Capacity
Capital Cost
Cost Type ExpressionExamples
(US)
Capital Cost ($) per unit of installed capacity $/gpd
Key Point
Be aware of inherent uncertaintyin SWRO capital cost expressions.
Insufficient Cost Components: Financing
The Breakdown…
• Borrow $250,000
• Term = 30 years
• Rate = 6 percent
• Annual compounding
Insufficient Cost Components: Financing
The Breakdown…
• Borrow $250,000
• Term = 30 years
• Rate = 6 percent
• Annual compounding
Annual payment: $18,150
Total amount repaid: $544,500 or 2.178x Principal
Insufficient Cost Components: Financing
The Breakdown…
• Borrow $300 million
• Term = 30 years
• Rate = 6 percent
• Annual compounding
Annual payment: $21.8 million
Total amount repaid: $653.4 million
Key Point
TWC must include debt service.
Insufficient Cost Components: Financing
Gaming the System at the Planning Level
Assumed Useful Life
AnnualPayment
Total Amount Repaid
Spin
30 Years $21.8 million $653.4 millionFavorable
operating costs
20 Years $26.2 million $523.2 millionFavorable capital cost
For a Principal of $300 million…
Key Point
An appropriate facilities useful life must be assumed.
FluctuatingCost Components
Fluctuating Cost Components
Characteristics:— Subject to change over time— Complicate efforts to compare SWRO projects costs over time and
disparate locations around the globe
Fluctuating Component
Fluctuating Cost Components
Characteristics:— Subject to change over time— Complicate efforts to compare SWRO projects costs over time and
disparate locations around the globe
Fluctuating Component
Metal Commodities
• Used in corrosion-resistant alloys
• Examples: Ni, Mo, etc.
• Changes during project development can be problematic for financing based on initial estimate prior to price spike
• Price and availability can vary by country
Fluctuating Cost Components
Characteristics:— Subject to change over time— Complicate efforts to compare SWRO projects costs over time and
disparate locations around the globe
Fluctuating Component
Metal CommoditiesKey Point
Project changes, as appropriate, particularly for equipment
replacement.
Fluctuating Cost Components
Characteristics:— Subject to change over time— Complicate efforts to compare SWRO projects costs over time and
disparate locations around the globe
Fluctuating Component
Metal Commodities
Oil
• Similar issues as for metal commodities, albeit for different equipment: pressure vessels, elements, etc.
• Example– 50 mgd SWRO plant
– Thousands of elements
– 20% rise in oil prices millions of dollars in
increased element replacement costs
Fluctuating Cost Components
Characteristics:— Subject to change over time— Complicate efforts to compare SWRO projects costs over time and
disparate locations around the globe
Fluctuating Component
Metal Commodities
Oil
Key Point
TWC figures should incorporate appropriately conservative
replacement costs.
Fluctuating Cost Components
Characteristics:— Subject to change over time— Complicate efforts to compare SWRO projects costs over time and
disparate locations around the globe
Fluctuating Component
Metal Commodities
Oil
Power
• Huge influence on TWC
• Cost can vary widely around the globe, complicating comparisons
Fluctuating Cost Components
Characteristics:— Subject to change over time— Complicate efforts to compare SWRO projects costs over time and
disparate locations around the globe
Fluctuating Component
Metal Commodities
Oil
Power
Key Point
Identify the assumed power rate of costs cited in the literature to translate to other potential SWRO projects that are
otherwise similar.
Fluctuating Cost Components
Characteristics:— Subject to change over time— Complicate efforts to compare SWRO projects costs over time and
disparate locations around the globe
Fluctuating Component
Metal Commodities
Oil
Power
Exchange Rates• Exchanges rates vary over time
• Inflation in various countries changes at different rates
Fluctuating Cost Components
Characteristics:— Subject to change over time— Complicate efforts to compare SWRO projects costs over time and
disparate locations around the globe
Fluctuating Component
Metal Commodities
Oil
Power
Exchange Rates
Key Point
Exchange rates at the time of project development, as well as inflation, must be taken into account even
before assessing theequitability of TWCs.
Summary
• SWRO costs cited in the literature often lack important qualifying information
• It is difficult for readers to properly assess TWCs in the literature
• It is critical for desalination experts and water treatment professionals in general to have a good understanding of SWRO cost components
Key Point
The magnitude of the TWC of any SWRO project will ultimately be far less important than the price consumers are willing to pay
when there are no other viable alternatives.
Thank you for your attention.
A Presentation By:
Brent Alspach1525 Faraday Ave.
Suite 290Carlsbad, CA 92008
(760) 602-3828brent.alspach@arcadis-us.com